Citation: Yusuf, M.; Surya, B.; Menne, F.; Ruslan, M.; Suriani, S.; Iskandar, I. Business Agility and Competitive Advantage of SMEs in Makassar City, Indonesia. Sustainability 2023, 15, 627. https://doi.org/10.3390/su15010627 Academic Editor: Wen-Hsien Tsai Received: 19 November 2022 Revised: 9 December 2022 Accepted: 20 December 2022 Published: 29 December 2022 Copyright: © 2022 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https:// creativecommons.org/licenses/by/ 4.0/). sustainability Article Business Agility and Competitive Advantage of SMEs in Makassar City, Indonesia Muhammad Yusuf 1, *, Batara Surya 2, * , Firman Menne 3 , Muhlis Ruslan 1 , Seri Suriani 4 and Iskandar Iskandar 5 1 Department of Management, Faculty of Economics and Business, University Bosowa, Makassar 90231, Indonesia 2 Department of Urban and Regional Planning, Faculty of Engineering, University Bosowa, Makassar 90231, Indonesia 3 Department of Accounting, Faculty of Economics and Business, University Bosowa, Makassar 90231, Indonesia 4 Department of Financial Management, Faculty of Economics and Business, University Bosowa, Makassar 90231, Indonesia 5 Department of Sociology, Faculty of Social and Political Sciences, University Bosowa, Makassar 90231, Indonesia * Correspondence: muhyusufsaleh@universitasbosowa.ac.id (M.Y.); batara.surya@universitasbosowa.ac.id (B.S.) Abstract: Corporate agility will encourage companies and economic enterprises to respond quickly to the dynamics of internal and external changes in the company. This study aims to analyze the effects of business innovation, CSR implementation, and digital transformation in improving business agility, with competitive advantage as a mediating variable. This study uses a quantitative approach with a survey method. Data were obtained through questionnaires distributed to 100 business units and SMEs as respondents in Makassar City. The results show that competitive advantage, digital transformation, and business innovation have a significant effect on business agility with a coefficient of determination of 72.4%, while CSR implementation and digital transformation have a negative correlation with SME business agility. Digital transformation, CSR implementation, and business innovation affect competitive advantage with a value of 53.9%, while digital transformation, CSR implementation, and business innovation affect business agility through corporate image. This study recommends the use of digital transformation and business innovation for small and medium enterprises (SMEs) to respond and adapt with business agility in Makassar City, Indonesia. Keywords: business agility; competitive advantage; digital transformation; business innovation 1. Introduction As a developing country, Indonesia needs to improve the performance and effective- ness of SMEs, especially regarding strategic planning in business, which is hoped to not only create efficiency and comfort in work, but also make it easier for SMEs to achieve competitive advantages. The development of an increasingly complex business world requires SMEs to take advantage of information technology, capabilities, and competen- cies to encourage growth in order to win in business competition [1,2]. One effort that needs to be developed by SMEs in the current digitalization era is to adapt to business agility to help make decisions quickly, facilitate communication, and respond quickly to changes that occur in business [3–5]. Furthermore, there is a need to improve information technology-based business strategies and work processes for SMEs [6,7]. Thus, to ensure business competitiveness for SMEs, companies are expected to be able to sharpen their agility by utilizing computer systems [8–10], as well as increase the ability of business actors to respond quickly to the market [11]. The development of business agility is in line Sustainability 2023, 15, 627. https://doi.org/10.3390/su15010627 https://www.mdpi.com/journal/sustainability